In this briefing:
- New J. Hutton Exploration Report (Weeks Ending 08/03/19)
- HK Connect Discovery Weekly: PICC, Xinyi Solar (2019-03-08)
- Weekly Oil Views: Crude Eyes Tightening Supply but in the Shadow of Gloom
- Xinyi Solar Placement – Past Deals Have Done Well, Improvement in Sentiment Should Help
- Korea M&A Spotlight: POSCO or SK to Acquire KCFT for About 1 Trillion Won?
1. New J. Hutton Exploration Report (Weeks Ending 08/03/19)
- Coverage now expanded to 730 mining companies
- Retain Peel Mining Ltd (PEX AU) as a Speculative Buy
- Current drilling infill only
- Est. A$4-4.5m cash with capital raising soon
- Very solid geological genetic model honing future extensional exploration efforts
- Expect maiden Resource computation to commence after next three hole assays released
- Aeon Metals Ltd (AML AU), Blackearth Minerals NL (BEM AU), Boss Resources (BOE AU), Centaurus Metals (CTM AU), Catalyst Metals (CYL AU), Amur Minerals (AMC LN), Patagonia Gold (PGD LN), Tyranna Resources (TYX AU), Gladiator Resources (GLA AU), King River Resources (KRR AU), Vango Mining (VAN AU), Hummingbird Resources (HUM LN), Caravel Minerals (CVV AU), Lefroy Exploration Ltd (LEX AU), Millennium Minerals (MOY AU), Northern Minerals (NTU AU), Blackham Resources (BLK AU), Avz Minerals (AVZ AU), Orocobre Ltd (ORE AU), Serabi Gold plc (SRB LN), Paringa Resources (PNL AU), Artemis Resources (ARV AU), Centrex Metals (CXM AU), Great Boulder Resources Ltd (GBR AU), Superior Lake Resources (SUP AU), Cora Gold Ltd (CORA LN), European Metals Holdings Ltd (EMH LN), Savannah Resources PLC (SAV LN) , IronRidge Resources Ltd (IRR LN)
2. HK Connect Discovery Weekly: PICC, Xinyi Solar (2019-03-08)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this insight, we will highlight PICC and Xinyi Solar.
3. Weekly Oil Views: Crude Eyes Tightening Supply but in the Shadow of Gloom
Crude has been gradually reconnecting with its supply-demand fundamentals, and the impact of highly disciplined OPEC cuts just two months into the group’s production restraint deal is becoming evident in relatively stable prices. Through much of last week, crude prices firmed and stood their ground even as global stock markets were skidding.
However, oil is not completely out of the shadows of the global economic sentiment. Crude prices were whiplashed last Friday along with the equity markets as a fresh wave of gloom and doom from the European Central Bank’s downward revision of eurozone growth projections rattled investors. Earlier in the week, China set off fresh alarm bells, by officially revising down its 2019 GDP growth target to 6-6.5%, while Premier Li Keqiang warned that the country’s economy faced a “tough struggle” ahead.
Nonetheless, benchmark Brent and WTI crude futures resisted the lows plumbed during intraday trading Friday, to close marginally higher on the week. While global oil demand growth forecasts remain tentative, supply fundamentals are clearly firming. Output from 11 of OPEC’s 14 members that agreed to collectively curb output by around 812,000 b/d starting January this year almost reached 100% of the target in February.
The race to the compliance finish line was helped by Saudi Arabia, which is slashing its output way beyond its commitment. Meanwhile, the three OPEC members exempted from the latest round of production cuts — Iran, Libya and Venezuela — are also under-delivering. That amounted to OPEC-14 production plunging by around 1.7 million b/d compared with the high of last October.
OPEC will need to be careful not to over-tighten the market, as happened through the first half of last year. We believe the group will be cautious on that front, given its experience of 2018, when it was forced to make two policy U-turns in the space of six months.
4. Xinyi Solar Placement – Past Deals Have Done Well, Improvement in Sentiment Should Help
Xinyi Solar Holdings (968 HK) is looking to raise about US$170m in its top-up placement with an upsize option of 225m shares.
The deal scored well on our framework owing to its good track record, strong earnings and price momentum. The company’s 2H 2018 result had marginally beaten estimates while the news of China potentially reversing its effort to reduce solar subsidy has helped improve the overall sentiment of Xinyi Solar. On top of that, the past deals have generally done well.
5. Korea M&A Spotlight: POSCO or SK to Acquire KCFT for About 1 Trillion Won?
It was reported in numerous local Korean media yesterday that POSCO (005490 KS) and SK Group are leading contenders to acquire a Korean company called KCFT (KCF Technology) for about 1 trillion won. KCFT specializes in making copper foil and thin film products, especially for the lithium ion batteries sector. KCFT’s major customers include Samsung SDI, LG Chem, NEC, and Panasonic.
The KKR private equity firm is the seller of KCFT. In February 2018, KKR acquired a 100% stake of LS Mtron’s copper foil and thin film business for 300 billion won and after this acquisition, renamed it KCFT. It has been reported that should these groups (POSCO or SK) low bid for KCFT, KKR may opt for an IPO of KCFT instead.
If POSCO is able to acquire KCFT, this should help to accelerate the POSCO Group’s expansion of the rechargeable battery related materials business and enhance its vertical integration of this business. If the deal gets completed at about 1 trillion won, this would represent a P/S of about 3.3x and P/E of about 25x, using 2018 figures.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.